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What Exactly Does Google Want From The 700 MHz Auction?

Everyone has their eyes on the upcoming Federal Communications Commission (FCC) 700 MHz wireless auction, and not just the folks in the tech world, but also stock brokers and wealth managers. At the close of business on Friday, Google stock closed at $600.25 a share (down to $598.30 in after hours trading), so people who have the company's shares in their portfolio are of course concerned when Big G ends the trading day/week with a drop of several billion dollars.

Google's interest in the 700 MHz auction has been a bit of mystery since it was first rumored to be planning to partake in the process some months ago. They told the FCC they would guarantee a minimum of a $4.6 billion bid if the FCC agreed to keep a portion of the frequency open access so that anyone could connect to it. The FCC agreed, and this seemed to very quickly fuel shifts in the wireless marketplace as Verizon went ahead and announced the impending opening of their network.

Now that the move is being made for networks to open up, is Google going to go after the 700 MHz auction with the fervor they previously demonstrated? Do they really want it so badly? Jeff Lindsay, an analyst at Sanford Bernstein, seems to think that they may be going after it still, but in such a manner that will make their shareholders nervous.

He estimates that they are going to have to spend at least $10 billion just to win, and then invest a minimum of $5 billion a year to develop their winnings into a viable business model. He feels that all of this will pay off by the year 2014 when he sees Google's revenue doubling due to the success of whatever they do with the band. All of his estimates are based on the idea of Google following traditional business models, and using the 700 MHz spectrum in the common manner of a wireless provider.

I think the issue Mr. Lindsay - and other analysts as well - forget is that this is Google. When have they ever done things in a "normal" or "traditional" manner? Yes, they have been asking for open access networks. There has to be a reason for this, of course. There has to be an "end game" they are aiming for. And my thoughts are it has all to do with Android.

It's not difficult to imagine an Android-powered device operating on an ad-supported system; allowing anyone to pick up a gPhone, possibly for free, and using the handset anywhere in the United States (over the 700 MHz band).

Mr. Lindsay is correct in his observation that the wireless infrastructure business is not an area that Google is familiar with. But Google has shown exceptional strength in entering into already developed markets before. One needs to look no further than Gmail to see an example of this. Did anyone really think online email could be turned upside down after so many years? Google did it, and most of the older mail providers then had to play catch up.

Whatever the case may be, no one knows exactly what Google is planning to do. To speculate this early on in the process seems to just be wild speculation, and even Mr. Lindsay admits he is not sure as to what the intent of the search giant is. He spends a good portion of his analysis going on a roundabout talking of the potential of a Google win at the auction, but also stating that they're intent may never have been to win. (Instead just to motivate people to open access.) I don't feel history supports this side of Mr. Lindsay's argument, as Google has never been one to announce something without having the real intent of backing up their words.

The 700 MHz band has a wealth of possible uses, and until the auction is over, no one will know for sure what any given company is planning to do with it. Everyone seems to be thinking strictly in the traditional sense of wireless: people buy a phone; they subscribe to a service; company provides said service.

Again, I say this is Google. You never know what they're going to do until they do it. They had a reason for stating their desire to be in the auction, and they obviously have a serious interest in it if they have gone through all of the legal hoops to be an eligible bidder. To think they are just going to throw away this opportunity to motivate other companies to action doesn't seem to be born out by past occurrences.

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